6/12/2009 @ 6:00PM

Stocks Under $10

Investing can be serious business, or a fun diversion. Often the difference lies in how much is at stake.

With cheap thrills in mind, we present 10 technology stocks under $10. These stocks are cheap in the “10 tube socks for $2″ way. You can dabble in a few and get a nice chunk of shares without committing the remains of your 401(k).

Not all tube socks are created equal. So we did basic vetting, tossing out unprofitable companies to list only those that make money for shareholders.

Some of the 10 stocks also are cheap based on price-to-earnings ratios, which many investors consider the best, quickest way to assess the value of a company’s stock.
Xerox
, for example, is a $7 stock trading at 10 times estimates of future earnings.
Compuware
, another bargain-basement buy, is also trading around 10 times earnings. By that metric, both are cheap compared with other technology stocks.

The Nasdaq technology stock index is trading at 20 times future earnings, according to Birinyi Associates. That’s more than the S&P 500′s price-to-earnings ratio of 16. Technology stocks typically trade at a premium, with investors betting they’ll outgrow other industries in revenues and profits.

Why bet on tech now? Though past returns are of course no prediction of future ones, the Nasdaq has outshone the rest coming out of the market nadir. There is growth in this market. The Nasdaq is up 18% in the past six months, leaps and bounds better than the S&P 500′s 4% bounce.

Technology executives are seeing signs of life. Enrique Salem, the new chief of security giant
Symantec
told Forbes recently that there’s healthy buying activity in healthcare and the public sector. Big companies are being picky though. “Now it’s return on yesterday,” says Salem. “Customers want to know how they can be more efficient with what they’ve already purchased.”

Vivek Ranadive, founder and chief executive of
TIBCO Software
, which makes software for the enterprise, is adamant that Silicon Valley remains a “Florence” of technological innovation–and that the work companies are doing here will help propel the economy forward. Cloud computing, he told Forbes recently, is one of those paradigm shifts that happens about once every 20 years. “We’re now entering ‘Enterprise 3.0,’” he said.

Companies may still have the same 10 million customers or so, but as intelligence gets embedded into networks those same companies may have 10 times the opportunities to touch a customer every month. That will translate into an explosion of new businesses and services, Ranadive predicts.

Those are the changes simmering beneath the landscape. For now, research firm IDC predicts spending on information technology will be near flat this year, with hardware sales (PCs, servers and printers) taking the biggest hit. IDC is expecting some growth in the software and IT services industry. The question every investor must answer: How patient are you willing to be?

Vegas is offering cheap room rates these days, but hotels get you on drinks and Blackjack rounds. At least with cheap stocks you know exactly how much you could lose, and chances are, you’ll see gains on a few, particularly if you’re ready to play for the long-term.